Introduction
The Czech National Bank (ČNB) has released a new macroeconomic forecast that paints a picture of moderate economic growth in 2025, albeit with signs of a slowdown compared to previous expectations. According to the latest report published on Wednesday, the Czech economy is expected to grow by 2.1% in 2025, down from the 2.4% projected in February. This revision reflects challenges related to weak foreign demand and global trade uncertainties.
Stable Growth in 2024, Slowdown Expected in 2025
For 2024, the Czech National Bank has maintained its forecast of 2.0% economic growth, consistent with the outlook from the Ministry of Finance. The ČNB notes that growth is primarily driven by household consumption, supported by real wage increases and lower interest rates. However, the outlook for 2025 is more cautious. ČNB Governor Aleš Michl stated that exports will continue to slow, negatively impacting GDP performance.
Inflation Expected to Exceed Target Levels
Another key takeaway from the forecast is a slight upward revision of inflation projections. The ČNB now expects an average inflation rate of 2.5% in 2024 (up from 2.4%) and 2.2% in 2025, exceeding the official 2% target. Inflation is expected to remain slightly above the central bank’s goal, due to strong domestic demand and global uncertainties.
According to a preliminary estimate from the Czech Statistical Office, the April 2025 inflation rate fell to 1.8%, the lowest in seven years. Michl praised this as a “fantastic success” but emphasized the need for long-term price stability moving forward.
External Factors and Geopolitical Risks
One of the main concerns looking ahead is the weakness of the European industrial sector, which is dampening foreign demand. In addition, Michl noted that protectionist trade policies under U.S. President Donald Trump, including significant tariff hikes, pose additional risks. The lack of transparency around specific trade measures makes it difficult to accurately assess their long-term impact on economic growth and price trends.
Comparison with Ministry of Finance Outlook
The Czech Ministry of Finance shares a similar outlook with the ČNB for 2024, projecting 2.0% GDP growth and an average inflation rate of 2.4%. However, it remains more optimistic for 2025, forecasting GDP growth of 2.4%, compared to the ČNB’s 2.1%.
Conclusion: Moderate Recovery with Key Uncertainties
The Czech Republic economic forecast for 2025 points to a context of moderate growth and stable inflation, yet several uncertainties remain, particularly on the international front. Strong household consumption will be key to supporting the domestic economy, while exports and geopolitical developments remain sources of vulnerability.
Future decisions by the ČNB regarding monetary policy, along with shifts in the global trade landscape, will be crucial in shaping the Czech economy over the coming years.
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Sources: https://www.cnb.cz/en/monetary-policy/forecast,
https://www.novinky.cz/clanek/ekonomika-centralni-banka-ocekava-pristi-rok-horsi-vykon-ekonomiky-40520315,
https://www.reuters.com/
